Good morning
It was a quiet day yesterday as we’d expected, with both a lack of economic data releases and the US Thanksgiving holiday looming. GBPUSD traded a 50 pips range between 1.2550 and 1.2600, EURUSD saw a wider 1.0450-1.0530 range but there really wasn’t anything to get excited about. Those pairs ended the London session around 1.2545 and 1.0470 respectively, leaving GBPEUR around 1.1980.
Overnight we saw a spell of USD buying as Trump announced the sort of tariffs he’d introduce on his first day in office, namely a 10% increase on China tariffs and 25% tariffs on Canada and Mexico. The latter could possibly contravene the USMCA treaty that was entered into back in July 2020 but as we know Trump doesn’t always worry about such matters. Anyway, the USD buying led to GBPUSD reaching 1.2505 and EURUSD 1.0425, although those moves didn’t last and as I type we are pretty much back to the levels we saw at the London close.
CAD is one of the bigger losers, with USDCAD trading from 1.3985 to a high of 1.4170 overnight, highest levels since Apr/May 2020. USD has held most of those gains, the pair now 1.4140. Some eyeing the 2016 and 2020 peaks around 1.4670/90 as an outside bet. USDMXN also spiked higher from 20.30 to 20.75 on the tariff comments. AUD, a reasonable proxy for China, also weakened, AUDUSD trading down from 0.6505 to 0.6435, while AUDNZD traded below 1.1100 and GBPAUD jumped from 1.9320 to 1.9435. AUD has since recovered a good portion of those losses mind you.
Yen has bucked the trend, making gains against USD with USDJPY trading as low as 153.55, an area that has been tested, and held, three or four times this week already, as such it is well worth keeping an eye on. A brief recovery to 154.20 this morning was short-lived, we are now 153.90. GBPJPY is currently 193.00.
We have heard from several central bank officials recently, not many have added anything new. However there are some exceptions. Fed’s Kashkari and Goolsbee sounded pretty dovish, with Kashkari saying a Dec rate cut could be appropriate and Goolsbee saying interest rates have a fair way to go before they reach neutral. ECB’s Lane was a bit more mixed. On one hand he sounded very dovish, suggesting the ECB may not need a gradual approach to rate cuts, his use of the word ‘forceful’ suggests he’d happily see a larger cut in December. On the other hand he also mentioned ECB must act carefully and assess the response of the economy to policy decisions. Meanwhile ECBs Nagel continues to warn of cutting rates too rapidly.
BoEs Dhingra has said that UK inflation is now more in line with its peers which is good news indeed, adding that US tariffs on China and the rest of the world could offer some downward pressure on UK inflation. However, if trade wars disrupt global supply chains then it could be a very different story. Of course there is still the likely inflationary impact of the recent budget to factor in, the BRC is already warning that shops will pass on higher staffing costs to the consumer.
There isn’t a great deal on the calendar today, US consumer confidence is likely to be of limited interest, while the FOMC minutes this evening may give some clues as to Fed thinking on future rate moves. The main release comes overnight, where RBNZ will be announcing whether they will be cutting rates 25 or 50bps. The latter is far more widely expected and as such I’d think pretty much priced in although a dovish statement could push NZD lower, indeed there is an outside chance of a 75bps cut which, if so, could also see a weaker NZD. GBPNZD is currently 2.15, AUDNZD 1.11 and NZDUSD 0.5840.
Desperately looking for something that will get me a little more active, for the last few weeks I’ve been playing Pickleball with the family. I don’t know if you’re familiar with the sport, I think it’s the fastest growing sport in the US and having played it I can see why. It’s played on a badminton-sized court, very simple, not unbearably strenuous but you certainly know you’ve done an hour of activity. Good fun as well, and at the moment it works despite slightly different fitness and ability levels. Worth a go if you’re into that sort of thing.
Have a great day
- 14.00 US house price index
- 15.00 US consumer confidence, new home sales
- 19.00 FOMC minutes
- 00.30 AUS CPI
- 01.00 RBNZ rate announcement
- 02.00 RBNZ press conference
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